Lufthansa offers 250 million euros to take on most of Alitalia's fleet, half of staff - source

FRANKFURT (Reuters) - Germany’s Lufthansa (LHAG.DE) has offered 250 million euros (£224 million) to take on most of Alitalia’s fleet of aircraft and half of its staff, a source close to the matter said on Tuesday.

Alitalia, which has made a profit only a few times in its 70-year history, was put under special administration earlier this year after staff rejected a plan to cut jobs and salaries.

Lufthansa is one of seven companies that submitted binding offers for Alitalia by Oct. 16.

Representatives from the German carrier, including the head of Lufthansa’s Italian airline Air Dolomiti, will meet with the three commissioners managing Alitalia on Thursday this week to discuss their offer, two sources said.

One of them said this was not the first meeting on the Lufthansa plan and was unlikely to yield significant progress.

According to the first source, Lufthansa offered to keep around 90-100 Alitalia planes, down from a fleet of 123.

The German carrier is not interested in Alitalia’s ground handling services and would only take up a slimmed-down version of the Italian flagship carrier, the person added, confirming details that first emerged in Italian daily Il Messaggero.

The proposal suggests taking over around 6,000 of Alitalia’s staff, compared with a current headcount of around 12,000.

The initial cash layout of 250 million euros could be doubled, depending on agreements reached with the government and suppliers, Il Messaggero said. Further investments could be made in future and some staff rehired once the airline has been restructured, it added.

Lufthansa would use Rome’s Fiumicino airport as an additional hub, offering transatlantic connections towards North and South America, while airports in Milan would be used for point-to-point connections and feeder traffic, the paper added.

An Alitalia spokesman declined to comment. A Lufthansa spokesman reiterated that the airline was only interested in a restructured “New Alitalia”.

Alitalia was once a symbol of Italy’s post-war economic boom but is now struggling to compete against low-cost carriers and high speed trains at home. It has not invested sufficiently in higher-margin long-haul routes to get back to profit.

Rome has ruled out renationalising Alitalia, but the fate of the airline remains politically sensitive and any tough restructuring to suit a foreign investor would rankle - especially if it involved thousands of job cuts.

Sector analysts already doubt any deal will come through anytime soon, especially with Italy gearing up for a general election early next year.

Apart from Lufthansa, British budget airline easyJet (EZJ.L) made an offer for “certain assets of a restructured Alitalia​”.

The bidders have until April 30 to improve their bids.

U.S. private equity fund Cerberus also expressed an interest in Alitalia but outside the official sale process, a spokesman told Il Sole 24 Ore. He said the fund aimed to gain control of the airline but would keep it Italian.

Reporting by Ilona Wissenbach; Writing and additional reporting by Agnieszka Flak in Milan; Editing by Kathrin Jones and Hugh Lawson